09 q3 health care equity markets review v11.ppt · new york health care equity capital markets...
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Minneapolis
New York HEALTH CARE EQUITY CAPITAL MARKETS REVIEW2009 Q3 Review
New York
Boston
San Francisco
Palo Alto
Piper Jaffray Equity Capital Markets
O t b 2009
Palo Alto
London
Shanghai
Hong KongOctober 2009
g g
Since 1895. Member SIPC and FINRA
BUILDING THE LEADING MIDDLE MARKET INVESTMENT BANK
• Deep industry expertise in key growth-oriented sectors• Global reach in the world’s leading capital markets• Full-service capabilities and unparalleled middle market transaction execution
• Investment Banking• Inst. Equity Sales & Trading• Equity & Debt Capital Markets• High-Yield & Structured Products
• Investment Banking• Inst. Equity Sales & Trading• Equity & Debt Capital Markets• High-Yield & Structured Products
Full service capabilities and unparalleled middle market transaction execution• Built on a 100+ year track record of quality service and customer success
Corporate & InstitutionalCorporate & Institutional
High Yield & Structured Products• Equity & High-Yield Research
High Yield & Structured Products• Equity & High-Yield Research
Public Finance & InstitutionalPublic Finance & Institutional
P bli Fi
United KingdomLondon
China
United StatesMinneapolis, MN Hartford, CT Orange County, CA
(headquarters) Helena, MT Palo Alto, CABoston, MA Houston, TX Phoenix, AZDallas TX Kansas City MO Portland OR• Public Finance
• Municipal Sales• Municipal Underwriting &
Trading• Derivative Products• Loan S ndications
Hong KongShanghai
Dallas, TX Kansas City, MO Portland, ORDenver, CO Lincoln, NE Richmond, VADes Moines, IA Los Angeles, CA Sacramento, CA
Milwaukee, WI St. Louis, MONew York, NY San Francisco, CA
Seattle, WA
• Loan Syndications
• Equity & Fixed Income• Master Limited Partnerships
B l d I t t
Asset ManagementAsset Management
• Balanced Investments
Piper Jaffray Companies (NYSE: PJC) is a leading, international middle market investment bank and institutional securities firm. Securities brokerage and investment banking services are offered in the United States through Piper Jaffray & Co., member SIPC and FINRA; in Europe through Piper Jaffray Limited, registered with the Financial Services Authority; and in Hong Kong through Piper Jaffray Asia Limited, Piper Jaffray Asia Securities Limited, and Piper Jaffray Asia Futures Limited, all of which are registered with the Hong Kong Securities and Futures Commission. Asset management products and services are offered through three separate investment advisory affiliates registered with
1
the Hong Kong Securities and Futures Commission. Asset management products and services are offered through three separate investment advisory affiliates registered with the U.S. Securities and Exchange Commission: Fiduciary Asset Management, LLC; Piper Jaffray Investment Management LLC; and Piper Jaffray Private Capital, LLC.
THE PIPER JAFFRAY TEAMJ
Equity Capital M arkets
Chad AbrahamManaging Director
Neil RileyPrincipal
Greg KlancherAssociateManaging Director
Head of Capital Markets(612) 303-6274
PrincipalHead of Health Care Equity Capital Markets
(612) 303-1601
Associate(612) 303-8309
Phil CapenAssociate
Michael BassettAssociate
John PetersonAnalyst
ConvertiblesPIPEs / RD s
Associate(212) 284-9346
Associate(612) 303-6865
Analyst(612) 303-6365
D St di ki M ti AlDave StadinskiManaging Director
Head of PIPEs / RDs(212) 284-9572
Chris Christina Forrest Koenig
Martin AlvarezManaging Director
Head of Convertibles(415) 984-5131
Corporate & Venture Serv ices
Managing Director(612) 303-8521
Chad HuberAssociate
Forrest KoenigVice President(415) 984-5142
Daniel GrosslightAssociateCorporate & Venture Serv icesAssociate
(212) 284-9573
Jeff BlickmanAnalyst
(212) 284-9501
Associate(415) 984-5116
Omar El-AyatAnalyst
(415) 984-5118
Tom WrightManaging Director
Head of CVS(612) 303-6039
Jay HersheyManaging Director
(612) 303-5724( )
TABLE OF CONTENTS
Section I Key Themes in Q3 2009
i k dSection II IPO Market Update
Section III Follow-on Market Update
b Section IV Equity Distribution Programs
Section V Convertible Market Update
Section VI PIPE and Registered Direct Market Update
Section VII Institutional Health Care Fund Movement
3
SECTION IKey Themes in Q3 2009
KEY THEMES IN Q3 2009
12%
The unemployment rate
is still forecasted to
peak in Q4 ’09, however
The Unemployment Rate: Actual vs. 2009 Quarterly Estimates
Q
9.3%
9.8% 9.9%9.7%
9.5%9.3%
9.7%9.5%
9.3%
10.1%
9.9%
9.3%
9.8%
9 3%9.5%9.5%
10%
= Actual = Q1 Est. = Q2 Est. = Q3 Est.
peak in Q4 09, however
recent estimates have
been reduced during Q3
6.9%
8.1%8.5%
7.9%
9.3%8.9%
9.3%
8%
men
t R
ate
4.5% 4.5%4.7% 4.7%
4.9%5.2%
6.1%
4%
6%
Un
emp
loym
2%
4%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Q1 Q2E Q3E Q4E'07 '08 '09 '10E
5Source: Thomson Baseline
KEY THEMES IN Q3 2009
Jobless claims,
considered to be a real
time indicator of
Weekly Initial Claims
Q
650
700time indicator of
economic health, have
also shown a steady
downward trend
3/28/09: Claims reach 674k
550
600
450
500
350
400
300Jul-07 Sep-07 Dec-07 Mar-08 Jun-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09
6Source: CapitalIQ
KEY THEMES IN Q3 2009
19%
30%
6.0%6%
8%
Expectations for
growth, both in terms
S&P 600 Quarterly Earnings GrowthUS Nominal GDP Growth by Quarter
Q
0%3%
0%
-1%
10% -9%
19%
-10%
0%
10%
20%5.5%6.0%
5.3%4.5%
1.0%
3.5%
1.4%
3.6%
2.6%
0%
2%
4%
6%of U.S. GDP and
small cap earnings,
have turned positive
as rising consumer -10% 9%
-15%
-36%-43% -40%
-25%
-40%
-30%
-20%
-5.4%-4.6%
-0.8%
-6%
-4%
-2%
as rising consumer
confidence and new
home sales point to
an economic recovery
120
-50%Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09E Q4 '09E
0.8
0.9
-8%Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09F Q4 '09F
Consumer Confidence Monthly New Home Sales (MM)
60
80
100
0 4
0.5
0.6
0.7
20
40
0.1
0.2
0.3
0.4
0Jul Sep Nov Jan '08 Mar May Jul Sep Nov Jan '09 Mar May Jul Sep
0Jul Sep Nov Jan '08 Mar May Jul Sep Nov Jan '09 Mar May Jul Sep
7Source: Thomson Baseline & CapitalIQ
KEY THEMES IN Q3 2009
140
Health Care growth
focused funds
continued their rally
Q
140 2009YTD
SinceBottom
Market Performance
2009YTD
SinceBottom
100
110
120
130
ndex
ed t
o 10
0
continued their rally
since bottoming in
March, albeit
underperforming the
broader markets 100
110
120
130
Inde
xed
to 1
00
S&P 500 17.0% 56.3%NASDAQ 34.6% 67.3%Russell 2000 21.0% 76.0%Dow Jones 10.7% 48.3%
YTD Bottom
Russell 2000 HC 18.2% 56.7%Russell 2000 Biotech 27.1% 59.3%R2 HC Services 24.1% 59.4%R2 Med Tech 10.5% 55.7%
60
70
80
90
Pri
ce In
60
70
80
90
1/1/09 2/1/09 3/1/09 4/1/09 5/1/09 6/1/09 7/1/09 8/1/09 9/1/09
Pri
ce I
1/1/09 2/1/09 3/1/09 4/1/09 5/1/09 6/1/09 7/1/09 8/1/09 9/1/09
Russell 2000 Health Care Russell 2000 Biotech Russell 2000 HC Services Russell 2000 Med Tech
1/1/09 2/1/09 3/1/09 4/1/09 5/1/09 6/1/09 7/1/09 8/1/09 9/1/09
S&P 500 NASDAQ Russell 2000 Dow Jones
Quarterly Mutual Fund Flows ($ Billions)
$49 260
$43.0
$12.0
$1.4 $1.7$9.0
$49.2
$27.6
$2.8
$16.5
$30.3$26.3
$15.7
0
20
40
-$40.0
-$2.2
-$39.1
(60)
(40)
(20)
0
8Source: CapitalIQ and Decision Economics, Inc.
(60)
Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09
KEY THEMES IN Q3 2009
431500
2009 IPO issuance
activity has exceeded Annual Median = 214
Annual IPO Offering Activity
Q
238
392
345
228
374
233
279
218
301330
153 147196 197 214208200
300
400m
ber
of IP
Os
the record low levels
of 2008
Annual Median = 214
78 68 76
30
129153 147
118
43 34
29
275052
290
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009YTD
Nu
YTD
Full Year Activity Through Q3
600
700
Follow-on activity
through September
has reached record
Annual Follow-on Offering Activity
Annual Median = 435
371
469
533
399 383413
373348
459
542
464 477435
247
448
254
350 353
283337
248294
412
316 339 322355287
438
300
400
500
600
f Fol
low
-on
Offe
ring
s
levels
Annual Median 435
215
0
100
200
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009YTD
Num
ber
of
9
Full Year Activity Through Q3
Source: Dealogic and Piper Jaffray ECMExcludes BCC/SPACs, closed-end funds, and transactions less than $20mm
KEY THEMES IN Q3 2009
100
Health Care IPO
issuance continues to Annual Median = 32
Annual Health Care IPO Offering Activity
Q
35
76
46
75
49
66
33
63
303236
443840
60
80m
ber
of IP
Os
lag while follow-ons
are on track to exceed
historical levels
Annual Median = 32
1823
138
3
1612
2430
15
6
3224
153111
12
50
20
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009YTD
Nu
YTD
Full Year Activity Through Q3
81
100
Annual Health Care Follow-on Offering Activity
Annual Median = 57
46
76
50
28
40
76
57
32
67 65
7681
60
47
30
65
28
49
34 37
5055 57
48
4540
60
80
f Fol
low
-on
Offe
ring
s
2824
2823
24
2827
0
20
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009YTD
Num
ber
of
10
Full Year Activity Through Q3
Source: Dealogic and Piper Jaffray ECMExcludes BCC/SPACs, closed-end funds, and transactions less than $20mm
KEY THEMES IN Q3 2009Q
$90 000
$100,000
2009 new issue
market highlights
Equity New Issue Volume by Product ($ in Millions)
$95,755$50,000
$60,000
$70,000
$80,000
$90,000
200 9 Y TD 20 08 Y TD % Ch a n ge
No
CapitalRaised($MM) No
CapitalRaised($MM) No
CapitalRaised($MM)
$9,685$16,374
$11,844$14,727$20,805
$4,952 $6,882
$26,021
$37,758
$15,816
$28,466$13,504$50,886$57,039
$44,485
$43,430
$935 $145 $828 $1,872$10,559
$0
$10,000
$20,000
$30,000
$40,000No ($MM) No ($MM) No ($MM)
IPO 29 $9,582 29 $26,692 0.0% -64.1%Follow-on 438 $149,784 218 $121,577 100.9% 23.2%
Total 467 $159,366 247 $148,268 89.1% 7.5%
$0
Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09
IPO Proceeds Follow-on Proceeds
• Offering activity has increased significantly since Q1 ’09 and is on track to significantly outpace 2008
• Follow-on issuance is leading the resurgence with nearly 400 issuances raising $140 billion since the first quarter of 2009. Offering activity has largely been driven by small-cap issuers (sub $2 billion in market cap) which account for 70% g y g y y p ( p)of transactions
• Shelf registration statements continue to prove to be instrumental financing tools with over 90% of follow-ons this year coming as shelf takedowns
• Q3 ’09 saw a resurgence of fully marketed follow-ons which accounted for 50 of the 197 follow-ons vs. 23 in the first half of the year; a good sign of confidence in the equity markets as issuers willingness to take market risk is increasing of the year; a good sign of confidence in the equity markets as issuers willingness to take market risk is increasing
• The IPO market continues to improve as 15 IPOs priced in Q3 ’09, 4 of which came on behalf of Health Care issuers
• The 2009 class of IPOs continue to perform well in the aftermarket, up 21% from offer price on average; positive performance should continue to drive investor demand for the asset class
• Health Care issuance continues its sequential improvement for the year with 6 transactions in Q1 growing to 13 and 36
11
offerings in Q2 and Q3, respectively; activity has largely been driven by Biotech issuers
Source: Dealogic and Piper Jaffray ECMExcludes BCC/SPACs, closed-end funds, and transaction less than $20mmNote: 2008 IPO capital raised includes $19.7B for Visa
PIPER JAFFRAY EQUITY CAPABILITIES
Piper Jaffray is the Preferred Bookrunner in the Middle Market in 2009
J Q
$32,900,000 $58,360,000 $422,452,500 $80,500,000 $16,000,000
Underwritten Underwritten Underwritten Underwritten Registered Direct Registered Direct IPO Registered Direct Registered Direct
Sole Manager Sole Manager Co-Manager Sole Bookrunner Sole ManagerOctober 16, 2009 August 14, 2009 August 11, 2009 July 30, 2009 July 29, 2009
$52MM / $100MM $300MM / $500MM $38,000,000 $10,000,000 $48,000,000
Bought Deal / Tandem Underwritten Underwritten Secured Loan Follow-on / Convert Registered Direct Registered Direct Registered Direct
Sole Manager Co-Manager Sole Manager Sole Manager Sole ManagerJune 8 & 17, 2009 May 21, 2009 April 16, 2009 March 10, 2009 January 30, 2009
12This advertisement shall not constitute an offer to sell or the solicitation of an offer to buy any of these securities, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the laws of any such jurisdiction. These securities having been sold, this listing appears as a matter of record only.
SECTION IIIPO Market Update
IPO MARKET UPDATE
Q3 ‘09 continued to
see improvement in Offering Activity Continues to Increase; Driven by Growth Sector and Sponsor-Backed Issuers
IPO Market Update – Key Takeaways
the IPO market with
15 offerings coming
to market, the most
active quarter since
• 15 IPOs priced in Q3 ‘09, the most active quarter since Q4 ’07; 29 IPOs have priced year-to-date
• Issuance activity has largely been driven by the Technology(10), Financial(8), and Heath Care(5) sectors
• Financial Sponsors have played a key role in 2009 IPO activity; 14 of the IPOs priced in 2009 have been on behalf of sponsor-backed companies
• Issuers have seen strong pricing performance with 24 of the 29 IPOs this year pricing at the mid-point of the range or active quarter since
Q4 ‘07better, indicating a strong investor bid for IPOs
• The 2009 class of IPOs continues to perform well in the aftermarket trading up 21% from offer, on average; this strong performance should help continue to drive demand for the asset class
• Filing activity continues to increase as issuers recognize a receptive investor community
Investor Sentiment has Improved; Investors Taking on More Risk to Drive PerformanceInvestor Sentiment has Improved; Investors Taking on More Risk to Drive Performance• The recent rally has resulted in more interest and new capital flowing back into equities; investors continue to take on risk
in efforts to outperform their benchmark indices
• We have seen the investor pool evolve first hand in 2009, with large, long-only mutual funds, small-cap generalists, and sector-specific hedge funds becoming increasingly more active in recent transactions
• As the investor community becomes increasingly more active in new issues the offering window will open to earlier stage y g y g p gissuers; for example, we anticipate the percentage of profitable IPO issuers to decline over the next few quarters
Health Care IPO Activity is Accelerating – Issuance is Being Driven by Services and Biotech Issuers • 5 Health Care IPOs have been priced in ’09, raising nearly $2 billion in capital
• Pricing performance has been mixed with 2 of the offerings pricing below the range and trading down in the aftermarket
I h f th S i (3) d Bi t h(2) t M di l T h l IPO h i d i Q1 ‘08• Issuance has come from the Services(3) and Biotech(2) sectors; no Medical Technology IPO has priced since Q1 ‘08
14Source: company filings, Dealogic, Bloomberg, and Piper Jaffray ECMData through 9/30/09Excludes transaction less than $20mm and closed-end funds
IPO MARKET UPDATE
Although IPO activity
remains below
IPO Activity by Quarter and Market Cap Group
80 79
historical levels, the
new issuance window
appears to be
broadening 60
70
63
6
71
broadening
40
50
60
f IP
Os
40
44
49
42
4649
56
38
The mix of issuers,
based on market cap,
is similar to historical
30
40
# o
30
38
trends
10
20
10
14
5
1 1
1315
0
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Less than $500M $500M - $1B Greater than $1B
15Source: company filings, Dealogic, and Piper Jaffray ECMData through 9/30/09Excludes BCC/SPACs, closed-end funds, and transactions less than $20mm
IPO MARKET UPDATE
2000
Health Care IPO
activity has been
Health Care IPO Activity by Quarter and Subsector
1
2
412
14
1600
1800
driven by Services
and Biopharma
issuers
1 14
3 1 5
4 4
8
10
f IP
Os
1000
1200
1400
111
1
2
2
1
1 1
1
3
3
4
6
# o
600
800
1000
5
2
6
3
65
2
7 7
2
6
2
2
2
1
1 1
221
22
4
200
400
1 10
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
0
Biopharmaceuticals Health Care Services Medical Technology Capital Raised
16Source: company filings, Dealogic, and Piper Jaffray ECMData through 9/30/09Excludes transactions less than $20 million
IPO MARKET UPDATE
($ in millions)
Pricing Date Issuer Ticker
Filing Range
Offer Price
Deal Value
Market Value
Deal Value / Market Value
%Secondary
% ChangeFTO
% Change1-Day
% ChangeCurrent Sector
Pricing Performance
2009 YTD IPOs2009 YTD IPOs15 IPOs priced in Q3,
more than the Date Issuer Ticker Range Price Value Value Market Value Secondary FTO 1 Day Current Sector
9/30/09 Talecris Biotherapeutics Holdings TLCR 18.00 - 20.00 $19.00 $950 $2,276 42% 42% 0% 11% 11% Health Care9/24/09 Shanda Games Ltd GAME 10.50 - 12.50 $12.50 $1,044 $3,601 29% 84% 9% -14% -6% Consumer9/24/09 Select Medical Holdings Corp SEM 11.00 - 13.00 $10.00 $300 $1,561 19% 0% -17% 1% 1% Health Care9/23/09 A123 Systems Inc AONE 8.00 - 9.50 $13.50 $438 $1,325 33% 2% 54% 50% 58% Clean Tech9/23/09 Colony Financial Inc CLNY 20.00 - 20.00 $20.00 $250 $255 98% 0% 0% -3% -2% Financial9/23/09 Vitacost.com VITC 11.00 - 13.00 $12.00 $132 $329 40% 60% 0% 0% -9% Technology9/23/09 Apollo Commercial Real Estate Finance ARI 20.00 - 20.00 $20.00 $200 $200 100% 0% 0% -8% -9% Financial9/23/09 Artio Global Investors Inc ART 24.00 - 26.00 $26.00 $650 $1,966 33% 0% 4% 5% 1% Financial
previous two quarters
combined
9/16/09 CreXus Investment Corp CXS 15.00 - 15.00 $15.00 $200 $272 74% 0% 0% -2% -5% Financial8/11/09 Starwood Property Trust Inc STWD 20.00 - 20.00 $20.00 $932 $851 109% 0% 0% 0% 1% Financial8/11/09 Emdeon Inc EM 13.50 - 15.50 $15.50 $422 $1,780 24% 55% 7% 7% 5% Health Care8/10/09 Cumberland Pharmaceuticals Inc CPIX 19.00 - 21.00 $17.00 $85 $392 22% 0% -15% -1% -5% Health Care8/5/09 Avago Technologies AVGO 13.00 - 15.00 $15.00 $745 $3,210 23% 50% 7% 8% 14% Technology8/5/09 CDC Software Corp CDCS 11.00 - 13.00 $12.00 $58 $300 19% 17% 0% -17% -23% Technology
7/29/09 PennyMac Mortgage Investment Trust PMT 20.00 - 20.00 $20.00 $294 $340 87% 0% 0% -5% 0% Financial6/30/09 LogMeIn Inc LOGM 14.00 - 16.00 $16.00 $123 $342 36% 25% 7% 25% 14% Technology6/25/09 Invesco Mortgage Capital Inc IVR 20.00 - 20.00 $20.00 $176 $170 104% 0% 0% -3% 9% Financial
IPOs have performed
well in the
aftermarket, trading 6/25/09 Invesco Mortgage Capital Inc IVR 20.00 20.00 $20.00 $176 $170 104% 0% 0% 3% 9% Financial6/24/09 Duoyuan Global Water Inc DGW 13.00 - 15.00 $16.00 $101 $336 30% 0% 14% 37% 106% Clean Tech6/24/09 MediData Solutions Inc MDSO 11.00 - 13.00 $14.00 $101 $313 32% 0% 17% 21% 8% Health Care6/23/09 Chemspec International Ltd CPC 7.00 - 9.00 $9.00 $73 $327 22% 22% 13% 0% -22% Industrials6/11/09 Cypress Sharpridge Investments Inc CYS 11.00 - 13.00 $11.00 $115 $184 62% 0% -8% 5% 29% Financial6/2/09 Government Properties Income Trust GOV 20.00 - 22.00 $20.00 $230 $399 58% 0% -5% -3% 20% REIT
5/20/09 OpenTable Inc OPEN 12.00 - 14.00 $20.00 $69 $432 16% 48% 54% 59% 38% Technology5/19/09 SolarWinds Inc SWI 9.50 - 11.50 $12.50 $174 $802 22% 26% 19% 10% 76% Technology5/13/09 DigitalGlobe Inc DGI 16.00 - 18.00 $19.00 $279 $853 33% 91% 12% 13% 18% Technology
/ / $ $ $ h l
up 21% on average
4/15/09 Rosetta Stone Inc RST 15.00 - 17.00 $18.00 $129 $366 35% 50% 13% 40% 28% Technology4/14/09 Bridgepoint Education Inc BPI 14.00 - 16.00 $10.50 $163 $559 29% 74% -30% 6% 45% Technology4/1/09 Changyou.com Ltd CYOU 14.00 - 16.00 $16.00 $138 $820 17% 50% 7% 25% 122% Technology
2/10/09 Mead Johnson Nutrition Co MJN 21.00 - 24.00 $24.00 $828 $4,800 17% 0% 7% 10% 88% Consumer
Mean $324 $1,012 44% 24% 6% 10% 21%Median $200 $399 33% 2% 4% 5% 9%
17Source: Dealogic & Piper Jaffray ECMIncludes deals greater than $20 million in deal sizeShading denotes Piper Jaffray managed offerings
IPO MARKET UPDATE
Financial Sponsors
have been a primary
driver of IPOs so far
2009 Financial Sponsor Backed IPOsPricing
Date Issuer
Post-DealMkt Value
($MM)
DealValue
($MM)% Secondary
Shares Financial Sponsor
%Ownership Pre-Deal
% Sold
on Deal
%OwnershipPost-Dealdriver of IPOs so far
this year
($ ) ($ ) p
9/30/09 Talecris Biotherapeutics $2,276 $1,064 42% Cerberus Partners 97.1% 23.9% 56.1%
9/24/09 Select Medical Holdings $1,561 $300 0% Welsh, Carson, Anderson & Stowe 66.7% - 53.9%
9/23/09 A123 Systems $1,325 $438 2% North Bridge Venture Partners 12.5% - 9.0%
Sequoia Capital 4.1% - 2.9%
8/11/09 Emdeon Inc $1,780 $422 55% General Atlantic 57.3% 15.7% 45.8%
Hellman & Friedman 32.4% - 29.8%
Sponsors have used
the IPO market as a
path to liquidity, not
8/5/09 Avago Technologies $3,533 $745 50% KKR 80.7% 10.0% 65.9%
6/30/09 LogMeIn Inc $342 $123 25% Prism Venture Partners 23.8% - 18.2%
Polaris Venture Ptns. 21.0% 13.5% 13.9%
Integral Capital Ptns 8.9% 21.4% 5.4%
6/24/09 MediData Solutions Inc $313 $101 0% Insight Venture Ptns. 33.9% - 24.3%
Milestone Venture Ptns 7.6% - 5.5%
necessarily a means
to liquidity, as a
number of Sponsor-
backed IPOs have
b ll i i
Stonehenge Capital Fund 6.1% - 4.4%
6/24/09 Duoyuan Global Water Inc $336 $101 0% Global Environment Fund 19.3% - 14.3%
5/20/09 OpenTable Inc $432 $69 48% Benchmark Capital Ptns 26.4% - 24.5%
Impact Venture 17.5% - 16.2%
InterActiveCorp 10.9% - 10.0%
Integral Capital Ptns 7.5% 7.0%
5/19/09 S l Wi d I $802 $174 26% B i C it l V t 25 5% 6 7% 20 4%been smaller in size
and included only
primary shares
5/19/09 SolarWinds Inc $802 $174 26% Bain Capital Venture 25.5% 6.7% 20.4%
Insight Ventures 31.5% 6.7% 25.3%
Donald C. Yonce 28.4% - 24.4%
5/13/09 DigitalGlobe Inc $853 $279 91% Morgan Stanley 36.8% 10.2% 32.0%
Beach Point Capital 14.9% 26.5% 10.6%
4/15/09 Rosetta Stone Inc $366 $129 50% ABS Capital Ptns 44.0% 25.0% 27.9%
Norwest Equity Ptns 28 7% 25 0% 18 2%Norwest Equity Ptns 28.7% 25.0% 18.2%
4/14/09 Bridgepoint Educ. Inc $559 $163 74% Warburg Pincus 89.3% 16.2% 68.9%
18Source: Dealogic & Piper Jaffray ECMIncludes deals greater than $20 million in deal sizeShading denotes Piper Jaffray managed offerings
IPO MARKET UPDATE
160180 360-Day IPO Backlog
180-Day IPO Backlog
The IPO backlog
has seen a
IPO Backlog IPO Backlog Aging by Sector
Days Since Filing
99109
100111
140
103 106 107
160
116 111
92 95
660
9388
80
100
120
140
160
O B
ackl
og
180-Day IPO Backlog
turnaround from Q2
lows with 76% of the
backlog filing in the
last 90 days
0 - 44 45 - 89 90 - 119 120 - 180 181 - 360 Total
Consumer 1 5 1 7
Energy & Mining 2 3 1 2 8
Financial 4 4 1 2 1 12
Health Care 2 2 466
52
3646
6788
7395
119
76 80 87
140
62 51 5833 40
1210
867383
0
20
40
60
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
IPOlast 90 days
Industrials 4 1 5
REIT 1 1
Technology 2 3 1 2 8
Transportation 1 1
Total 16 19 2 3 6 46
'05 '05 '05 '05 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '08 '09 '09 '09
Health Care IPO Backlog
6 of 8 Health Care Deal LTM LTM
issuers in backlog
have LTM revenues
greater than $100
Filing Date Issuer Ticker
Deal Value ($MM)
LTMRev's
($MM)
LTMNI
($MM) Subsector Business Description9/29/2009 Accretive Health Inc AH $200 $449 $7 Health Care Services Provider of healthcare revenue cycle management services.9/15/2009 Anthera Pharmaceuticals Inc ANTH $70 - ($17) Biopharmaceuticals Pharmaceutical development company.8/17/2009 HealthPort Inc HPRT $100 $285 ($59) Health Care Services Information technology company and provider of turnkey revenue cycle management7/17/2009 Addus HomeCare Corp ADUS $69 $245 $5 Health Care Services Provider of home social and medical services.7/25/2008 AutoGenomics Inc AGMX $86 $4 ($13) Biopharmaceuticals Provides automated molecular testing solutions.6/20/2008 AGA Medical Holdings Inc AGAM $200 $164 $8 Medical Technology Holding company for manufacturer of transcatheter occlusion devices for heart defects.3/7/2008 B i k L b i I BOST $100 $103 $2 H l h C S i L b f d h di i f million 3/7/2008 Bostwick Laboratories Inc BOST $100 $103 $2 Health Care Services Laboratory focused on the diagnosis of cancer.
12/19/2007 Prometheus Laboratories Inc RXDX $100 $292 $29 Medical Technology Pharmaceuticals, pharmacogenetic testing, drug monitoring, pathology and IT services.
19Source: Dealogic & Piper Jaffray ECMShading denotes Piper Jaffray managed offerings
RECENT PIPER JAFFRAY INITIAL PUBLIC OFFERINGS
2009 Piper Jaffray Managed IPOs
J
June 30, 2009October 01, 2009 August 11, 2009 August 11, 2009 J ,, g , g ,
Initial Public Offering
$122,666,672
Initial Public Offering
$414,000,000
Initial Public Offering
$422,452,500
Initial Public Offering
$931,500,000
April 14, 2009April 15, 2009June 23, 2009June 24, 2009
Initial Public OfferingInitial Public OfferingInitial Public OfferingInitial Public Offering
Duoyuan Global Water
g
$163,012,500
g
$129,375,000
g
$72,783,000
g
$101,200,000
20This advertisement shall not constitute an offer to sell or the solicitation of an offer to buy any of these securities, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the laws of any such jurisdiction. These securities having been sold, this listing appears as a matter of record only.
SECTION IIIFollow-on Market Update
FOLLOW-ON MARKET UPDATE
Q3 ’09 saw the
second consecutive Q3 Saw Another Strong Quarter of Offering Activity With 197 Transactions Pricing
Follow-on Market Update – Key Takeaways
quarter of record
follow-on activity with
more issuers utilizing
a longer marketing
• The follow-on market remains extremely active with nearly 400 follow-ons pricing over the previous two quarters raising $140 billion in capital
• Activity continues to be driven by small cap issuers which account for 70% of the transactions this year
• Shelf registrations continue to be a critical financing tool with over 90% of this year’s follow-ons coming as shelf takedowns
a longer marketing
period (4-6 days vs. 1-
2 days in Q2)
• Q3 ’09 saw a resurgence of fully marketed follow-ons which accounted for 50 of the 197 follow-ons vs. 23 in the first half of the year; a good sign of confidence in the equity markets as issuers willingness to take market risk is increasing
• Marketed follow-on pricing has improved from low double-digit discounts to high single-digit discounts
Investor Sentiment has Improved; Investors Taking on More Risk to Drive Performance• The recent rally has resulted in more interest and new capital flowing back into equities; investors continue to take on The recent rally has resulted in more interest and new capital flowing back into equities; investors continue to take on
risk via liquidity events in an effort to outperform their benchmark indices
• The follow-on offering window is wide open, however, we’re seeing early signs of demand tapering off into year-end
Health Care Offering Activity is Happening – Issuance is Being Driven by Biopharma
• Q3 ’09 was the most active quarter in terms of Health Care follow-on issuance since Q1 ’06; offering activity is being driven by Biopharmaceutical issuers who had the most active quarter on record
• 29 follow-ons priced in Health Care raising $3.6 billion in capital; 22 in Biopharma, 4 in Med Tech, and 3 in Services
• 2009 offerings continue to perform well, up 19% in the aftermarket; these “IPO-like” returns will continue to drive demand in the space
22Source: company filings, Dealogic, Bloomberg, and Piper Jaffray ECMData through 9/30/09Excludes transaction less than $20mm and closed-end funds
FOLLOW-ON MARKET UPDATE
18 17200 $100
Follow-on Activity by QuarterFollow-on activity
continued to improve
1613
19
20
1718
18
17
23
33
157
130
2020
28
37
3425
27
40
29
29
1618
80
120
160
# o
f Fol
low
-ons
$40
$60
$80
Pro
ceed
s ($
B)
in Q3; notably, fully
marketed follow-on
activity increased
nearly three-fold from
65 6075
9176 86
41
8064
88
35
64
18 2714 6 5
18
50
13
1516
24
55
38
24 33
2721
912
210
0
40
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
#
$0
$20
Pnearly three fold from
Q2
Marketed Accelerated Bought Follow-on Proceeds ($B)
File / Offer Performance by Quarter Last Trade / Offer Discount by Quarter
(2%)
0% 0%
File-to-offer discounts
are returning to more
normal levels
-8.4%
-5.4%
-9.3% -8.9% -9.0%
-3.1%-3.4%
-4.4%
-2.4%
-6.0%
-4.1%
-5.5%
-9.5%(10%)
(8%)
(6%)
(4%)
(2%)
-2.6%-2.4%
-2.1%
-2.8%-2.7%-2.6%
-3.3% -3.2%-3.0%
(4%)
(3%)
(2%)
(1%)
-15.0%
-10.7%
(18%)
(16%)
(14%)
(12%)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-4.4% -4.4%
-6.1%
-5.1%
-6.3%
-5.5%
(7%)
(6%)
(5%)
( )
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
23
Q'06
Q'06
Q'06
Q'06
Q'07
Q'07
Q'07
Q'07
Q'08
Q'08
Q'08
Q'08
Q'09
Q'09
Q'09
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/09Excludes transactions less than $20mm and closed-end funds
FOLLOW-ON MARKET UPDATE
Follow-on offering
activity continues to be
d i b i i
Follow-on Offering Activity Breakdown
Follow-ons Driven by Selling Shareholders*2009 YTD Follow-on Deal Volume by Sector
Energy/Mining20%
Financial25%
148
170
170
150
200
30%
40%driven by companies in
the financial, energy &
mining, and REIT
sectors
Clean Tech3%
Consumer6%
Health Care10%
Industrials8%
OtherREIT14%
TMT7%
Transportation5%
36
148
104
33
140
0
50
100
0%
10%
20%
Other1%
Real Estate1%
14% 02003 2004 2005 2006 2007 2008 2009
0%
# of Follow-ons w/ Selling Shareholders % of Total FOs
70%75%
The second half of 2009
has witnessed a
Follow-ons by Market Cap Follow-ons by Marketing Style
100%70%
55%
45%
60%
f O
ffer
ings
resurgence of fully
marketed follow-ons as
companies are less
concerned about market
63%
77%
57%60%
80%
f O
ffer
ings
16%
25%
19%14%
0%
15%
30%
2008 2009
% o
fconcerned about market
risk28%
9%12%
17%
26%
11%
0%
20%
40%
2008 1H 2009 2H 2009
% o
f
24
< $2B $2B - $5B > $5B
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/09*Defined as selling shareholder selling 50% or more of the offeringExcludes transactions less than $20mm and closed-end funds
Accelerated Bought Marketed
FOLLOW-ON MARKET UPDATE
Health Care follow-
ons surged in Q3
Health Care Follow-on Activity by Quarter and Sector
2022
25 $5,000
lead by the
Biopharmaceutical
sector
18 1816
19
9
1311
20
788
910
15
20
# of
Fol
low
-ons
$2,000
$3,000
$4,000
on P
roce
eds
($M
M)
45
67
34
56
2 2
56
1
45
2 23 3
21
64
2 24
1 1
53
21 1
4
0
5
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
#
$0
$1,000
Follo
w-o
%
0%0%
Health Care File / Offer Performance By Quarter Health Care Last Trade / Offer Discount by Quarter
05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09
Biopharmaceuticals Health Care Services Medical Technology Capital Raised
-4.3%-4.4%
-2.3%-2.7%
-3.9%
-2.7%-2.9%-2.1%-1.9%
-4.4%
6 9%
(6%)
(4%)
(2%)
-5.2%
-7.5% -7.8%-7.1%
-8.9%
-5.2%-6.8%
-3.4%-4.5%
-10.8%
-7.2%
-4.8%
(12%)
(8%)
(4%)
-10.7%
-8.5%-8.9%
-6.9%
(12%)
(10%)
(8%)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-14.4%
-18.7%(20%)
(16%)
( )
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
25
'06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '08 '09 '09 '09'06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '08 '09 '09 '09
Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/09Excludes transaction less than $20mm and closed-end funds
FOLLOW-ON MARKET UPDATE
2009 Health Care Follow-onsBiopharmaceutical Follow-ons
($ in Millions) Pricing PerformancePricing D t I Ti k
FilingP i
Offer P i
MarketingSt l
Deal V l
Market V l
% S d
% Change FTO
% Change 1 D
% Change C tDate Issuer Ticker Price Price Style Value Value Secondary FTO 1-Day Current
9/30/09 Dyax Corp DYAX $4.07 $3.83 Bought $21 $318 0% -6% -6% -6%9/29/09 China-Biotics Inc CHBT $17.21 $15.00 Accelerated $69 $373 0% -13% 7% 7%9/25/09 Auxilium Pharmaceuticals Inc AUXL $35.62 $34.50 Bought $119 $1,631 0% -3% 0% -1%9/24/09 Incyte Corp INCY $8.13 $6.75 Accelerated $140 $797 0% -17% -2% 0%9/23/09 Momenta Pharmaceuticals Inc MNTA $11.60 $10.75 Accelerated $43 $509 0% -7% 1% -1%9/17/09 Rigel Pharmaceuticals Inc RIGL $7.66 $7.25 Accelerated $94 $382 0% -5% 5% 13%9/17/09 Vi I VVUS $10 79 $10 50 A l t d $109 $836 0% 3% 5% 1%9/17/09 Vivus Inc VVUS $10.79 $10.50 Accelerated $109 $836 0% -3% 5% -1%8/20/09 AVI BioPharma Inc AVII $1.78 $1.42 Accelerated $35 $190 0% -20% -2% 21%8/11/09 Seattle Genetics Inc SGEN $11.84 $10.75 Accelerated $136 $1,076 0% -9% 8% 31%8/6/09 MAP Pharmaceuticals Inc MAPP $10.10 $9.70 Accelerated $34 $246 0% -4% 0% 8%8/6/09 ONYX Pharmaceuticals Inc ONXX $36.55 $30.50 Accelerated $140 $1,874 0% -17% 6% -2%8/5/09 Idenix Pharmaceuticals Inc IDIX $3.69 $3.14 Accelerated $23 $245 0% -15% 0% -2%8/5/09 Inspire Pharmaceuticals Inc ISPH $4.97 $4.50 Accelerated $100 $392 0% -9% 2% 16%8/4/09 A i d Ph ti l I ARIA $1 99 $1 75 A l t d $38 $211 0% 12% 8% 26%8/4/09 Ariad Pharmaceuticals Inc ARIA $1.99 $1.75 Accelerated $38 $211 0% -12% 8% 26%8/4/09 MannKind Corp MNKD $8.13 $7.35 Bought $54 $903 0% -10% 1% 34%
7/30/09 Micromet Inc MITI $5.59 $5.00 URD $81 $372 0% -11% 27% 33%7/28/09 Human Genome Sciences Inc HGSI $14.00 $14.00 Accelerated $374 $2,330 0% 0% 5% 34%7/23/09 OREXIGEN Therapeutics Inc OREX $8.27 $7.50 Accelerated $86 $369 0% -9% 5% 31%7/22/09 Cell Therapeutics Inc CTIC $1.63 $1.30 Accelerated $44 $803 0% -20% 8% -5%7/8/09 XenoPort Inc XNPT $21.50 $19.00 Accelerated $55 $641 0% -12% 2% 12%7/8/09 A Ph ti l I ARNA $4 67 $4 17 B ht $52 $432 0% 11% 5% 7%7/8/09 Arena Pharmaceuticals Inc ARNA $4.67 $4.17 Bought $52 $432 0% -11% -5% 7%
6/30/09 Skystar Bio-Pharmaceutical Co SKBI $7.00 $12.98 Marketed $21 $59 0% N/A 7% 20%6/23/09 Halozyme Therapeutics Inc HALO $7.53 $6.50 Accelerated $40 $673 0% -14% 0% 9%6/18/09 ImmunoGen Inc IMGN $7.82 $7.00 Accelerated $40 $439 0% -10% 1% 16%5/27/09 Medivation Inc MDVN $25.00 $21.00 Accelerated $66 $741 0% -16% 2% 29%5/21/09 Cephalon Inc CEPH $63.07 $60.00 Accelerated $300 $4,657 0% -5% -1% -3%5/7/09 Dendreon Corp DNDN $19.76 $19.20 Bought $230 $2,204 0% -3% 0% 46%
3/31/09 All Th ti I ALTH $6 99 $6 30 B ht $49 $623 0% 10% 2% 15%3/31/09 Allos Therapeutics Inc ALTH $6.99 $6.30 Bought $49 $623 0% -10% -2% 15%2/18/09 Vertex Pharmaceuticals Inc VRTX $32.56 $32.00 Accelerated $320 $5,250 0% -2% 5% 18%2/13/09 InterMune Inc ITMN $17.96 $16.35 Bought $66 $769 0% -9% 7% -3%2/13/09 Geron Corp GERN $7.77 $6.60 Bought $48 $671 0% -15% -3% -1%1/28/09 Seattle Genetics Inc SGEN $10.46 $9.72 Bought $56 $907 0% -7% 4% 44%
Mean $96 $998 0% -10% 3% 14%Median $61 $656 0% 10% 2% 12%
26Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/09Excludes transaction less than $20mmShading denotes Piper Jaffray managed offerings
Median $61 $656 0% -10% 2% 12%
FOLLOW-ON MARKET UPDATE
2009 Health Care Follow-onsHealth Care Services Follow-ons
($ in Millions) Pricing PerformancePricing Filing Offer Marketing Deal Market % % Change % Change % Change gDate Issuer Ticker
gPrice Price
gStyle Value Value Secondary
g FTO
g 1-Day
gCurrent
9/17/09 SXC Health Solutions Inc SXCI $43.48 $41.50 Marketed $215 $1,218 0% -5% 13% 13%8/27/09 Clarient Inc CLRT $3.55 $3.50 Accelerated $64 $276 100% -1% 16% 20%8/18/09 American Dental Partners Inc ADPI $13.10 $12.00 Accelerated $31 $201 0% -8% 0% 17%8/6/09 Emergency Medical Services Corp EMS $39.89 $40.00 Marketed $368 $431 100% 0% 5% 16%6/4/09 Express Scripts Inc ESRX $64.45 $61.00 Marketed $1,613 $16,870 0% -5% 4% 27%6/2/09 Brookdale Senior Living Inc BKD $12.35 $10.75 Accelerated $173 $1,297 0% -13% 1% 69%/ / g
5/19/09 Beckman Coulter Inc BEC $53.33 $53.00 Accelerated $250 $3,396 100% -1% 0% 30%
Mean $388 $3,384 43% -5% 6% 27%Median $215 $1,218 0% -5% 4% 20%
Medical Technology / Diagnostics Follow-onsgy / g($ in Millions) Pricing Performance
Pricing Date Issuer Ticker
FilingPrice
Offer Price
MarketingStyle
Deal Value
Market Value
% Secondary
% Change FTO
% Change 1-Day
% Change Current
9/24/09 Qiagen NV QGEN $22.37 $20.25 Accelerated $640 $4,768 0% -9% 2% 5%9/22/09 Bruker Corp BRKR $10.02 $9.85 Marketed $128 $1,653 100% -2% -1% 8%8/14/09 MAKO Surgical Corp MAKO $7.72 $7.25 URD $58 $248 0% -6% 3% 21%8/6/09 Sirona Dental Systems Inc SIRO $28.00 $23.75 Marketed $205 $1,352 100% -15% 1% 25%
Key Takeaways:
/ / y4/16/09 Hansen Medical Inc HNSN $3.82 $3.25 URD $38 $141 0% -15% 14% 8%1/30/09 DexCom Inc DXCM $3.12 $3.00 URD $48 $143 0% -4% 8% 164%
Mean $186 $1,384 33% -9% 4% 39%Median $93 $800 0% -8% 2% 15%
Key Takeaways:
• Shelf registrations continue to be instrumental as 49 of the 51 HC follow-ons came as shelf takedowns
• Biopharmaceuticals continues to drive activity as demand for higher beta sectors remains strong
• Strong aftermarket performance has increased investor appetite for Health Care stocks
27Source: company filings, Dealogic and Piper Jaffray ECMData through 9/30/09Excludes transaction less than $20mmShading denotes Piper Jaffray managed offerings
FOLLOW-ON MARKET UPDATE
120
We are seeing the
impact of the market
Follow-on Market Update – Financing NeedsQuarters of Cash for Small Cap Health Care Companies1
3
23
16
90
120
pani
es
Biopharma HC Services Med Techdownturn on small
cap Health Care
companies 71
100
8479
5474 67
3
31
21 1
4
14
109 12
38
30
60
# o
f Com
p
3944
24
45
54
27 34 32 372
15
9
0'08 '09 '08 '09 '08 '09 '08 '09<4 Quarters 4-8 Quarters 8-12 Quarters >12 Quarters
Small Cap Health Care Companies Are Feeling More Pressure• Compounded by the credit crisis and the lack of a financing market, a number of small cap Health Care
companies have seen a noticeable reduction in quarters of available cash to fund operations
100 i h l th 1 f ti l h t th i t b t d t 71
<4 Quarters 4-8 Quarters 8-12 Quarters >12 Quarters
• 100 companies have less than 1 year of operational cash at their current burn rate as compared to 71 companies in 2008
• That said, we have seen a sequential increase in recapitalized companies with 79 companies with greater than 12 quarters of cash at the end of Q3 vs. just 52 at the end of Q2
28Source: Bloomberg, and Piper Jaffray ECM1 Examines companies >$20 million and <$2 billion in market cap with negative operating cash flows
SECTION IVEquity Distribution Programs
EQUITY DISTRIBUTION PROGRAMS
Since 2008 EDPs
have become Equity Distribution Program Overview
Equity Distribution Programs – Key Takeaways
Q
increasingly popular
financing tools with
2009 seeing the most
filings on record
• Equity Distribution Programs are an agreement between an issuer and an agent, whereby an agreed upon amount of capital can be raised via multiple draw downs “at-the-market” over a set period of time
• The stock is offered pursuant to an effective shelf registration statement
• The draw down period is initiated at the issuers request and typically lasts 5-20 days; it is protocol to have a minimum threshold price below which the agent will not sell stockfilings on record threshold price, below which the agent will not sell stock
EDPs Have Become Increasingly Popular Financing Tools; 2009 Has Seen The Most EDPs On Record• EDPs have become increasingly popular with 90 programs announced in the first three quarters of 2009 vs. 108 programs in
2004 - 2008
• We are seeing the product evolve to a more common tool for Health Care issuers to acquire growth capital
• Aiding the increasing popularity is the discreet nature of the draw down periods, low cost of execution, and minimal time commitment by issuers because no filing is required
• Filing activity has been driven by companies of all market caps, and small-cap issuers account for 60%
• For issuers with the appropriate liquidity and trading profile (at least $2 - $4mm ADTV), this product is an excellent alternative that offers minimal market risk and maximum flexibility
Th ff i ti t t diti l i t d i E it Li f C dit• These programs offer superior execution to traditional investor driven Equity Lines of Credit
Health Care Has Been Active in Terms of EDPs Announced Accounting for 10% of 2009 Activity
• 9 Health Care EDPs have been announced in 2009 accounting for $222 million in capital
• Activity is being driven by Biopharma which accounts for 8 programs; we have seen 1 in the Services space
• Piper Jaffray recently announced a $25 million Equity Distribution Program with Array Biopharma
30Source: company filings, Dealogic, Bloomberg, and Piper Jaffray ECMData through 9/30/09
EQUITY DISTRIBUTION PROGRAMS
$18,112$20,000
2009 has outpaced
previous years in
• Number of Announced EDPs since 2004 • Total Value of EDPs Announced since 2004 ($MM)
90100
Q
$8,877$10,000
$15,000
terms of the number
of EDPs announced57
60
80
$586 $1,125$2,122 $2,052
$0
$5,000
In previous years,
10
2015
6
0
20
40
2004 2005 2006 2007 2008 2009EDPs were primarily
executed on behalf of
REITS, Energy, and
Specialty Finance
2004 2005 2006 2007 2008 2009
29
35
• EDPs by Sector since 1/1/2009 • EDPs by Market Capitalization since 1/1/2009
REIT31%
Transports8% Consumer
2%p y
companies – 2009
has seen activity
coming from growth
22
1415
14
21
28
Energy/Mining13%
31%Clean Tech
1%
sectors like
Consumer and
Health Care
10
0
7
14
Healthcare
Industrial6%
Finance29%
31
<$200 $200-$500 $500 - $2B $2B-$5B >$5B10%29%
Source: company filings, Dealogic, Bloomberg, and Piper Jaffray ECMData through 9/30/09
EQUITY DISTRIBUTION PROGRAMS
EDPs have seen
minimal price impact
DateAnnounced Company Sector
Price @Announce
Amount($MM)
Mkt Val($MM)
EDP/MV
90-DayADTV
EDP/ADTV
% Chg Price1 Day
% Chg Price7 Days
% Chg Price30 Days
9/29/09 Equity Residential REIT $31.46 $535 $9,154 5.8% $133.85 4.00x -2% - -9/18/09 Array Biopharma Inc Healthcare $2.82 $25 $136 18.4% $2.06 12.14x 1% -12% -24%9/17/09 Solarfun Power Holdings Co Ltd Clean Tech $6.20 $30 $300 10.0% $9.11 3.29x 4% -1% -10%9/17/09 Zions Bancorp Finance $19.31 $250 $2,227 11.2% $103.66 2.41x -5% -8% -5%
Q
upon announcement,
down just 1%
9/15/09 Novavax Inc Healthcare $5.58 $19 $540 3.5% $68.12 0.28x -9% -15% -30%9/15/09 UDR Inc REIT $14.25 $214 $2,145 10.0% $41.61 5.14x 5% 7% 9%9/14/09 E*Trade Financial Corp Finance $1.66 $150 $1,987 7.5% $156.61 0.96x 8% 20% 2%9/9/09 Huntington Bancshares Inc Finance $4.08 $150 $2,467 6.1% $86.20 1.74x 0% 11% 12%9/9/09 Cathay General Bancorp Finance $8.87 $75 $440 17.1% $7.80 9.61x 5% 10% 3%9/8/09 Euroseas Ltd Transports $4.40 $31 $166 18.6% $0.68 45.57x 2% 8% 1%9/4/09 Central Pacific Financial Corp Finance $2.42 $15 $70 21.6% $4.12 3.64x -6% -5% 0%9/4/09 BioMed Realty Trust Inc REIT $12.72 $120 $1,248 9.6% $21.43 5.60x 2% 2% 3%
8/27/09 Sun Communities Inc REIT $18.36 $29 $371 7.9% $1.77 16.57x -1% -4% 18%8/26/09 Energy Transfer Partners LP Energy/Mining $41.70 $300 $7,040 4.3% $25.76 11.65x -1% -5% 2%8/21/09 American Equity Investment Life Holding Co Finance $8.15 $50 $474 10.5% $3.43 14.57x 0% 4% -5%8/20/09 Host Hotels & Resorts Inc REIT $9.67 $400 $5,840 6.8% $110.20 3.63x 9% 5% 15%8/19/09 AECOM Technology Corp Industrial $28.61 $114 $3,271 3.5% $27.95 4.10x 0% -1% 1%8/18/09 Chicago Bridge & Iron Co NV - CB&I Industrial $14.65 $147 $1,576 9.3% $20.51 7.14x -1% 9% 21%8/17/09 Dynavax Technologies Corp Healthcare $1.53 $15 $56 27.0% $1.34 11.23x 3% 7% 39%8/14/09 Nationwide Health Properties Inc REIT $30.93 $155 $3,456 4.5% $41.60 3.72x -5% 2% 2%8/12/09 AvalonBay Communities Inc REIT $66.61 $400 $5,324 7.5% $122.35 3.27x 0% -7% 3%8/5/09 Almost Family Inc Healthcare $31.59 $50 $309 16.2% $5.78 8.65x -8% -8% -11%8/5/09 LTC P ti I REIT $25 97 $75 $602 12 5% $3 59 20 90 4% 5% 6%
29 of the last 44
companies to file
EDPs this year had
8/5/09 LTC Properties Inc REIT $25.97 $75 $602 12.5% $3.59 20.90x -4% -5% -6%8/4/09 FPL Group Inc Energy/Mining $57.01 $335 $23,457 1.4% $135.94 2.46x -1% 1% -3%8/3/09 Tortoise Energy Capital Corp Finance $20.25 $30 $354 8.5% $1.37 21.96x 0% 2% -9%8/3/09 Washington Real Estate Investment Trust REIT $25.91 $94 $1,509 6.2% $16.27 5.78x 2% 6% -2%
7/31/09 Affiliated Managers Group Finance $66.46 $200 $2,743 7.3% $39.89 5.01x 2% 4% -2%7/30/09 AVANIR Pharmaceuticals Healthcare $2.27 $28 $188 15.1% $1.88 15.13x -5% -5% -15%7/27/09 DiamondRock Hospitality Co REIT $7.13 $75 $643 11.7% $9.93 7.55x -7% -5% 0%7/21/09 Tortoise Energy Infrastructure Corp Finance $26.66 $40 $627 6.4% $1.41 28.42x -1% 0% -1%7/14/09 Peregrine Pharmaceuticals Inc Healthcare $0.79 $25 $187 13.4% $2.19 11.43x 362% 381% 375%6/19/09 MDU Resources Group Inc Energy/Mining $18 73 $94 $3 539 2 6% $14 76 6 34x -3% -1% 4%y
market caps under $2
Billion
6/19/09 MDU Resources Group Inc Energy/Mining $18.73 $94 $3,539 2.6% $14.76 6.34x -3% -1% 4%6/12/09 Hartford Financial Services Group Inc Finance $14.08 $900 $5,372 16.8% $307.81 2.92x -18% -12% -20%6/12/09 Omega Healthcare Investors Inc REIT $15.93 $100 $1,313 7.6% $20.30 4.93x -4% -4% -4%6/12/09 Hersha Hospitality Trust REIT $2.99 $45 $189 23.7% $0.76 59.37x -9% -16% -25%6/10/09 CB Richard Ellis Group Inc REIT $8.14 $50 $2,203 2.3% $48.83 1.02x 11% 4% -1%6/9/09 Valley National Bancorp Finance $12.53 $71 $1,848 3.8% $18.38 3.86x -6% -8% -9%6/8/09 StemCells Inc Healthcare $1.75 $30 $181 16.6% $3.92 7.65x -5% -6% -10%6/5/09 Paragon Shipping Inc Transports $5.46 $55 $258 21.2% $9.04 6.04x -8% -16% -35%6/4/09 Stifel Financial Corp Finance $46.40 $46 $1,313 3.5% $21.17 2.19x -1% -5% -1%6/2/09 ProLogis REIT $9.26 $370 $4,099 9.0% $135.07 2.74x -9% -2% -18%g ,6/1/09 Zions Bancorp Finance $13.68 $250 $1,808 13.8% $113.97 2.19x 7% 5% -17%
5/29/09 NorthStar Realty Finance Corp REIT $3.32 $33 $255 13.0% $2.25 14.76x 1% -3% -13%5/27/09 Park National Corp Finance $65.22 $70 $911 7.7% $3.17 22.08x -2% -3% -13%
Mean (n=44) $143 $2,323 10.5% $43.36 9.86x 7% 8% 5%Median $75 $1,280 9.2% $17.32 5.69x -1% -1% -2%
Mean (Sub $2B Mkt Cap) (n=29) $63 $685 12.5% $18.36 12.88x 11% 11% 8%Median (Sub $2B Mkt Cap) $46 $440 11.7% $4.12 8.65x -1% -3% -5%
32Source: company filings, Dealogic, Bloomberg, and Piper Jaffray ECMData through 9/30/09
CASE STUDY: ARRAY BIOPHARMA
• Deal Value: $25 million
• Offering Price: At Market
$25,000,000g
• Last Trade Before Filing: $2.82
• Market Value:
• Deal Value/Market Value:
$136 million
18%
Equity Distribution Program
• Fees:
• Stock Price:
3% commission
Announcement/1-day: 0.7%
At the Market Pricing
Equity Distribution Program
• Liquidity:
/ y
Pre-Deal 90-Day ADTV: $2.1 million
Deal Value/ADTV: 12.1x
• Use of Proceeds: • Make payments on credit facilities currently accruing at the rate of 7.5% per annum
• Fund research and development efforts
9/18/09
• Description:
p
• Develops small molecule drugs to treat cancer and diseases. The company has seven developments in the pipeline.
33
SECTION VConvertible Market Update
CONVERTIBLE MARKET UPDATE
$
$10
Convertible Market Affirmatively Open• The primary market affirmatively opened with 91 new issues
representing $26bln of new convertible capital raised YTD• Generally, convertibles from larger market cap issuers, require
Convert Market UpdateBroad Capital Market Churn
Exchange Repurchase Tender OfferNew Issuance
$0.4$0.0
$0.7 $0.1
$2.5
$4.8$6.2
$4.4 $4.1
$0.4
$3.2
($1.5)($0.9)($1.4)($1.4)($0.8)$0
$5
Generally, convertibles from larger market cap issuers, require fewer days of trading (as measured by the number of underlying shares over the average daily trading volume), and represent a smaller share of the issuers’ market cap are considered higher quality convertibles
• By that standard, September’s new issues represented a more diverse quality of issuer
($4.3)
($7.4)
($3.3)
($6.0)($4.8)
($10)
($5)
q y– The new convertibles in September came from smaller market
cap issuers on average than the previous months– The September issues represent on average 26% of their issuers’
market cap, greater than the 19% for convertible issues in the previous 8 months
– The September issues, also required more days of trading than 5 of last 8 months ($13.8)($15)
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
of last 8 months
We believe the convertible market will remain open for issuers with less than pristine characteristics:
• Capital has returned to convertible investing strategies– Year to date, $34.7B in par value convertibles have been retired
by debt for equity exchanges, issuer repurchases, or restructuring This compares to $26 1B of new issue convertibles
Median Market Capitalization
$9,365$9 000
$10,000
restructuring. This compares to $26.1B of new issue convertibles in 2009
– Investors are reporting an increased availability and cost of leverage
– We estimate convertible investors received $4.5B of new capital in-flows
• Pricing for new issue convertibles remains driven by breakeven $4 000
$5,000
$6,000
$7,000
$8,000
$9,000
g ypricing. Issues in Q3 priced with coupons high enough to recoup the conversion premiums within the call protection period
• This “wide” pricing has encouraged outright convertible investors interested in equity exposure and downside protection provided by bonds
$314$0 $129
$1,420
$2,673$1,990
$1,027 $1,224
$2,624
$910
$0
$1,000
$2,000
$3,000
$4,000
b A l A SNov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Data through September 30, 2009
Source: Piper Jaffray analysis of Company filings/press releases
HEALTHCARE CONVERTIBLE MARKET UPDATE
He alth C a re
Financial9%
REIT2%
Media1% Financial
14%
Media2%REIT
2005 – 2008 Industry Breakdown
2009 Industry Breakdown
Industrials15%
He a lth C a re8%
Clean Tech5%
Transportation9% Transportation
5%
He a lth C are
14%8%
Industrials8%
5%
Energy & Technology
15%
Clean Tech5%
Energy & Mining
13%Energy & Mining
16%
Consumer13%
Technology22%
Technology20%
5%
Consumer10%
First Trade Date
Company SecurityMarket
Cap (MM)Total
Size (MM)Yield Premium
Years toMaturity
DaysTrading
% of Market Cap
Breakeven Concurrent
Equity
9/24/2009 Incyte Corp Sr Note $673MM $400MM 4.750% 30.0% 5 20.7x 59.5% 4.86x $139.7
l h d $ $ $9/22/2009 Tenet Healthcare Corp Mandatory $2,814MM $335MM 7.000% 20.0% 3 5.0x 11.9% 2.38x $0.0
8/7/2009 ONYX Pharmaceuticals Inc Sr Note $2,000MM $200MM 4.000% 30.0% 7 5.0x 10.0% 5.77x $140.3
Number of Deals = 3 Average: $1,829MM $312MM 5.250% 26.7% 5 10.2x 27.1% 4.34x $93.3
Sum of Deals = $935.0 Median: $2,000MM $335MM 4.750% 30.0% 5 5.0x 11.9% 4.86x $139.7
Data through September 30, 2009
Source: Piper Jaffray analysis of Company filings/press releases
SECTION VIPIPE and Registered Direct Market Update
PIPE AND REGISTERED DIRECT MARKET UPDATE
81 PIPEs/RDs were
completed for $3.1 All PIPE/RD Activity by Quarter (a)
2005 – 2009 YTD PIPE/RD Activity
192
158
209185
173174200
250
300
RD
s $8
$10
$12
d ($
B)
billion in Q3 ‘09, up
14% versus Q3 ‘08
PIPE/RD issuance
7154 62
9681
88
158
102
156
131 11596
119
83
50
100
150
# of
PIP
Es/R
$2
$4
$6
Cap
ital
Rai
sed
$4.2 $6.1 $4.7 $5.7 $3.4 $7.9 $3.6 $5.3 $4.0 $5.1 $10.6 $6.9 $9.1 $3.1$4.6 $6.0 $5.9$8.1 $3.40
Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09
$0
Capital Raised ($B) PIPEs/RDs Completed
PIPE/RD Activity Since 1/1/2009 PIPE/RD Activity Since 1/1/2009
Common StockSector No.
Total AmtOff (MM)
Clean Tech 16 $463Consumer 14 $3,037
ConvertibleSector No.
Total AmtOff (MM)
Clean Tech 10 $321Consumer 7 $636
Energy 16 $486Financial 14 $6,314Health Care 81 $1,901Industrial Growth 17 $1,391Technology 19 $1,018Total 177 $14,610
Energy 5 $154Financial 8 $533Health Care 11 $320Industrial Growth 11 $2,195Technology 10 $310Total 62 $4,469
38(a) Source: PlacementTracker.com as of September 30, 2009. Includes all common stock,
convertible preferred and convertible debt PIPE/RD transactions greater than $10 million.(b) Percentage indicated is based on number of offerings.
PIPE AND REGISTERED DIRECT MARKET UPDATE
41 PIPEs were
completed for $2.0 All PIPE Activity by Quarter (a)
2005 – 2009 YTD PIPE Activity
101
167146
174
94
168
151134
155
108 104120
160
200
PEs $6
$8
$10
ed (
$B)
billion in Q3 ‘09,
down 28% versus Q3
‘08 PIPE issuance
$3.8 $3.9 $5.5 $4.2 $5.1 $5.3 $3.1 $5.5 $7.1 $2.9 $4.5 $3.2 $3.5 $4.6 $9.8 $6.7 $7.9 $2.0$6.8
76
5641
5243
577077
10194104
40
80# of
PIP
$2
$4
Cap
ital
Rai
se
0
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
$0
Capital Raised ($B) PIPEs Completed
PIPE Acti it Since 1/1/2009PIPE Activity Since 1/1/2009Common StockSector No.
Total AmtOff (MM)
Clean Tech 3 $47Consumer 10 $2,952
ConvertibleSector No.
Total AmtOff (MM)
Clean Tech 10 $321Consumer 7 $636
Energy 10 $270Financial 12 $6,251Health Care 31 $625Industrial Growth 14 $1,225Technology 10 $840Total 90 $12,210
Energy 5 $154Financial 8 $533Health Care 9 $265Industrial Growth 11 $2,195Technology 9 $255Total 59 $4,359
39(a) Source: PlacementTracker.com as of September 30, 2009. Includes all common stock,
convertible preferred and convertible debt PIPE transactions greater than $10 million.(b) Percentage indicated is based on number of offerings.
PIPE AND REGISTERED DIRECT MARKET UPDATE
Q3 ‘09 RD issuance
matched the previous All RD Activity by Quarter (a)
2005 – 2009 YTD RD Activity
4040
26
36
30
40
50
Ds $900
$1,200
$1,500
d ($
MM
)
quarter’s record total
of 40 RDs completed
101114
1821
18
7
26
13
8
17
22221924
11
10
20# of
RD
$300
$600
Cap
ital
Rai
sed
$250 $595 $570 $869 $418 $350 $342 $724 $752 $241 $579 $523 $809 $276 $1,193$1,132$806$834 $1,3030
Q1'05
Q2'05
Q3'05
Q4'05
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Q2'07
Q3'07
Q4'07
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
$0
Capital Raised ($MM) RDs Completed
RD A ti it Si 1/1/2009RD Activity Since 1/1/2009Common StockSector No.
Total AmtOff (MM)
Clean Tech 13 $416Consumer 4 $85
ConvertibleSector No.
Total AmtOff (MM)
Clean Tech 0 —Consumer 0 —
Energy 6 $216Financial 2 $62Health Care 50 $1,277Industrial Growth 3 $167Technology 9 $268Total 87 $2 491
Energy 0 —Financial 0 —Health Care 2 $55Industrial Growth 0 —Technology 1 $55Total 3 $110
40(a) Source: PlacementTracker.com as of September 30, 2009. Includes all common stock,
convertible preferred and convertible debt RD transactions greater than $10 million.(b) Percentage indicated is based on number of offerings.
Total 87 $2,491 Total 3 $110
PIPE AND REGISTERED DIRECT MARKET UPDATE
So far in 2009, only
27% of traditional
2009 YTD Common Stock PIPE/RD Activity (a, b)
% of Traditional PIPEs/RDsWith Warrant Coverage
common stock PIPEs
and 53% of
traditional common
stock RDs had
With Warrant Coverage
63%75%
100%
alstock RDs had
warrant coverage
27%
53%47%
25%
50%
% o
f Tot
al
Traditional PIPE/RD Transaction Size as % of Market Cap
PIPE/RD Issuer Market Cap
0%
PIPEs RDs
No Warrants Warrants
23%
22%
p
34%
23%
20%
5%
30% 22%
15%
6%
Less than $50MM $50MM to $100MM $100MM to $200MM
41
0% to 5% 5% to 10% 10% to 15% 15% to 20% Greater than 20% $200MM to $400MM Greater than $400MM
(a) Source: PlacementTracker.com as of September 30, 2009. Includes all agented common stock PIPE/RD transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
PIPE AND REGISTERED DIRECT MARKET UPDATE
$100-200 million
market cap issuers PIPE/RD Structure Breakdown
2009 YTD Convertible PIPE/RD Activity (a, b)
% of Traditional PIPEs/RDsWith Warrant Coverage
have led the
convertible PIPE/RD
activity in 2009 YTD,
accounting for 34%
70%
60%
80%
100%
With Warrant Coverage
61%60%
80%
100%
67%
100%
accounting for 34%
of issuance 30%
33%
20%
40%
60%
% o
f Tot
al
39%
20%
40%
60%
% o
f Tot
al
0%
PIPEs RDs
Convertible Notes Convertible Preferred
PIPE/RD Issuer Market Cap
0%0%
PIPEs RDs
No Warrants Warrants
PIPE/RD Transaction Size as % of Market Cap
58%
11%
15%
34%
14%
p
8%
15%
8%
25%
15%
12%
Less than $50MM $50MM to $100MM $100MM to $200MM
42
0% to 5% 5% to 10% 10% to 15% 15% to 20% Greater than 20%$ $ $ $ $
$200MM to $400MM Greater than $400MM
(a) Source: PlacementTracker.com as of September 30, 2009. Includes all agented convertible PIPE/RD transactions greater than $10 million.
(b) Percentage indicated is based on number of offerings.
SECTION VIIInstitutional Health Care Fund Movement
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Health Care sector
equity asset
Equity Movements Among Funds With the Most Health Care Assets Under Management
Q4 '08 Q1 '09 Q2 '09HC Assets
UnderFundsUnder
movement among
the top Health Care
funds – as measured
by equity assets
Institution Name City StyleHC Portfolio
WeightQ1 '09
% ChangeHC Portfolio
WeightQ2 '09
% ChangeHC Portfolio
WeightMgmt($MM)
Mgmt($MM)
Fidelity Management & Research Boston Growth 15% -2% 13% -2% 11% $58,710 $518,555Wellington Management Co. Llp Boston Value 24% -2% 22% -2% 20% $50,871 $254,105Capital World Investors Los Angeles Value 12% 0% 12% -1% 11% $43,957 $416,341Capital Research Global Investors Los Angeles Growth 11% -1% 10% -1% 10% $30,064 $315,836T. Rowe Price Associates, Inc. Baltimore Growth 16% -2% 14% -1% 13% $29,326 $231,463Alliancebernstein Lp New York Value 14% -1% 13% -2% 11% $27,046 $248,478Dodge & Cox, Inc. San Francisco Contrarian 24% -9% 15% 4% 19% $20,960 $112,205Bl k k Ad i I N Y k V l 1 % 1% 14% 1% 13% $19 08 $146 31by equity assets
under management
Blackrock Advisors, Inc. New York Value 15% -1% 14% -1% 13% $19,708 $146,731Norges Bank Investment Management Oslo Growth 8% -1% 7% 0% 7% $16,142 $215,916Columbia Management Advisors, Inc. Boston Value 11% 0% 12% 0% 12% $12,855 $111,235Primecap Management Co. Pasadena Growth 25% -1% 24% -2% 22% $12,449 $56,287Janus Capital Management Llc Denver Aggressive Growth 14% 0% 15% -1% 14% $10,866 $78,655Goldman Sachs Asset Management Lp (United States) New York Growth 14% -2% 13% -1% 12% $10,514 $87,591Bank Of New York Mellon Asset Management New York Value 10% 3% 13% 0% 12% $10,385 $83,088Mfs Investment Management Boston Value 12% 0% 12% 0% 11% $10,362 $90,942Clearbridge Advisors New York Growth 21% -3% 18% 0% 18% $9,384 $53,258Grantham, Mayo, Van Otterloo Co. Llc Boston Value 18% -1% 17% -1% 16% $9,178 $57,826Grantham, Mayo, Van Otterloo Co. Llc Boston Value 18% 1% 17% 1% 16% $9,178 $57,826Jennison Associates Llc New York Growth 24% -4% 20% -3% 17% $9,024 $53,476Jpmorgan Asset Management, Inc. New York Value 13% -1% 11% -1% 10% $8,585 $82,005Oppenheimerfunds, Inc. New York Growth 10% -1% 10% 0% 10% $8,406 $85,086Fil Investments International Ltd. London Growth 12% -1% 11% -1% 9% $7,323 $77,159State Farm Insurance Co. Asset Management Bloomington Income 19% -1% 18% -1% 17% $7,248 $42,303Neuberger Berman Llc New York Value 13% -1% 12% 0% 12% $7,042 $59,879Intech Investment Management Llc West Palm Beach Growth 15% 0% 14% 0% 14% $6,885 $48,046Eaton Vance Management, Inc. Boston Value 13% 0% 14% -1% 12% $6,525 $52,397Invesco Aim Management Group, Inc. Houston Growth 18% -1% 17% -2% 15% $6,412 $42,654Ubs Global Asset Management Switzerland Zürich Growth 12% 0% 12% -1% 11% $6,277 $55,765Putnam Investment Management, Inc. Boston Value 17% -1% 16% -1% 15% $6,250 $42,050Barrow, Hanley, Mewhinney & Strauss, Inc. Dallas Contrarian 18% -3% 16% -2% 14% $6,074 $44,272Ubs Global Asset Management Chicago Value 14% -2% 12% -1% 11% $6,004 $54,852
Median 14% -1% 13% -1% 12% $9,873 $80,330
44% representative of change in assets between 3/31/09 and 6/30/09Source: Bigdough, excludes Indexed & Quantitative Investors“-” denotes accounts that have no holdings in the subsector
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Health Care Buyers and Sellers ($MM)% Change in Current
Position Position ($MM)
N B k I t t M t 55% $16 142Norges Bank Investment Management 55% $16,142
Capital World Investors 11% $43,957
Paulson & Co., Inc. 79% $5,143
Mfs Investment Management 20% $10,362
Janus Capital Management Llc 18% $10,866$1,678
$1,709
$2,272
$4,242
$5,745
Franklin Mutual Advisers Llc 59% $4,292
Credit Suisse (United States) 39% $5,541
Capital Research Global Investors 5% $30,064
Dodge & Cox, Inc. 6% $20,960
Blackrock Advisors, Inc. 5% $19,708$992
$1,258
$1,427
$1,565
$1,601
% Change in CurrentPosition Position ($MM)
Friess Associates Llc -33% $1,840
Rbc Dominion Securities, Inc. -44% $1,292($999)
($893)
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000
, % $ ,
Lord Abbett & Co. Llc -18% $4,622
Fidelity Management & Research -2% $58,710
Putnam Investment Management, Inc. -17% $6,250
Alliancebernstein Lp -5% $27,046
Renaissance Technologies Llc -32% $3 033($1 434)
($1,350)
($1,255)
($1,022)
($1,003)
($999)
Renaissance Technologies Llc 32% $3,033
Bill & Melinda Gates Foundation -97% $42
Wellington Management Co. Llp -3% $50,871
Marsico Capital Management Llc -37% $2,627($1,510)
($1,457)
($1,443)
($1,434)
($1,600) ($1,400) ($1,200) ($1,000) ($800) ($600) ($400) ($200) $0
45% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Biopharmaceutical Buyers and Sellers ($MM)% Change in Current
Position Position ($MM)
C it l W ld I t 15% $31 649Capital World Investors 15% $31,649
Norges Bank Investment Management 51% $11,352
Paulson & Co., Inc. 126% $3,907
Janus Capital Management Llc 31% $6,898
Franklin Mutual Advisers Llc 87% $3,206$1,491
$1,629
$2,176
$3,819
$4,015
Dodge & Cox, Inc. 11% $14,620
Capital Research Global Investors 7% $21,432
Credit Suisse (United States) 38% $3,959
Mfs Investment Management 18% $5,586
Pictet Asset Management Sa 53% $2,249$775
$838
$1,081
$1,308
$1,404
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500
% Change in CurrentPosition Position ($MM)
Grantham, Mayo, Van Otterloo Co. Llc -7% $7,825
Rbc Dominion Securities, Inc. -48% $752($705)
($614), % $
Axa Rosenberg Investment Management Llc -18% $3,309
Renaissance Technologies Llc -30% $1,712
Lord Abbett & Co. Llc -30% $2,207
T. Rowe Price Associates, Inc. -7% $14,791
Bill & Melinda Gates Foundation -97% $42($1 325)
($1,061)
($948)
($744)
($733)
($705)
Bill & Melinda Gates Foundation 97% $42
Marsico Capital Management Llc -36% $2,573
Alliancebernstein Lp -10% $18,562
Fidelity Management & Research -6% $33,664($2,233)
($1,963)
($1,472)
($1,325)
($2,500) ($2,000) ($1,500) ($1,000) ($500) $0
46% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Health Care Services Buyers and Sellers ($MM)% Change in Current
Position Position ($MM)
T R P i A i t I 14% $8 205T. Rowe Price Associates, Inc. 14% $8,205
Norges Bank Investment Management 83% $2,015
Fidelity Management & Research 6% $12,263
Alliancebernstein Lp 12% $4,432
Axa Rosenberg Investment Management Llc 67% $1,023$409
$488
$698
$916
$1,002
Partner Fund Management Lp 551% $364
Ing Investments Llc 71% $669
Turner Investment Partners, Inc. 45% $807
Shumway Capital Partners Llc - $236
Capital World Investors 8% $3,100$219
$236
$251
$277
$308
$0 $200 $400 $600 $800 $1,000 $1,200
% Change in CurrentPosition Position ($MM)
Silchester International Investors Ltd. -89% $34
Goldman Sachs Asset Management Lp (United States) -18% $1,407($316)
($286)g p ( ) % $ ,
Tcw Asset Management Co., Inc. -30% $763
Lone Pine Capital Llc -100% $0
Renaissance Technologies Llc -32% $722
Janus Capital Management Llc -24% $1,158
Putnam Investment Management Inc -25% $1 239($421)
($370)
($332)
($329)
($325)
($316)
Putnam Investment Management, Inc. 25% $1,239
Dodge & Cox, Inc. -10% $4,551
Friess Associates Llc -56% $412
Wellington Management Co. Llp -10% $9,233($988)
($519)
($491)
($421)
($1,200) ($1,000) ($800) ($600) ($400) ($200) $0
47% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Medical Technology Buyers and Sellers ($MM)% Change in Current
Position Position ($MM)
N B k I t t M t 57% $2 776Norges Bank Investment Management 57% $2,776
Mfs Investment Management 24% $4,062
Blackrock Advisors, Inc. 21% $3,064
Fidelity Management & Research 4% $12,783
Janus Capital Management Llc 18% $2,809$420
$512
$540
$789
$1,010
Walter Scott & Partners Ltd. 72% $877
Dodge & Cox, Inc. 24% $1,789
Goldman Sachs Asset Management Lp (United States) 10% $3,439
Cramer Rosenthal Mcglynn Llc 49% $944
Credit Suisse (United States) 46% $903$283
$308
$310
$344
$366
$0 $200 $400 $600 $800 $1,000 $1,200
% Change in CurrentPosition Position ($MM)
Friess Associates Llc -38% $366
Axa Rosenberg Investment Management Llc -34% $519($265)
($222)g g % $
Morgan Stanley & Co., Inc. -24% $902
Cantillon Capital Management Llc -56% $225
American Century Investment Management, Inc. -19% $1,269
Putnam Investment Management, Inc. -20% $1,256
Renaissance Technologies Llc -37% $600($357)
($316)
($305)
($286)
($286)
($265)
Renaissance Technologies Llc 37% $600
T. Rowe Price Associates, Inc. -6% $6,330
Jennison Associates Llc -17% $2,030
Intech Investment Management Llc -30% $1,062($450)
($427)
($425)
($357)
($500) ($450) ($400) ($350) ($300) ($250) ($200) ($150) ($100) ($50) $0
48% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Health Care sector
equity asset
Equity Movements Among the Top Sub $10B Health Care Funds
Q4 '08 Q1 '09 Q2 '09HC Assets
UnderFundsUnder
movement among
the top sub $10
billion funds – as
measured by equity
Institution Name City StyleHC Portfolio
WeightQ1 '09
% ChangeHC Portfolio
WeightQ2 '09
% ChangeHC Portfolio
WeightMgmt($MM)
Mgmt($MM)
Lilly Endowment, Inc. Indianapolis Growth 100% 0% 100% 0% 100% $4,481 $4,481Orbimed Advisors, Inc. New York Growth 99% 0% 99% -2% 97% $3,390 $3,489Sectoral Asset Management, Inc. Montreal Long/Short 98% -8% 90% 9% 100% $3,272 $3,277Fairholme Capital Management Llc Miami Value 45% -8% 38% 0% 38% $3,201 $8,475Healthcor Management Lp New York Long/Short 97% -7% 90% 3% 92% $3,057 $3,309Millennium Management Llc New York Growth 19% 4% 23% 1% 24% $2,204 $9,373Altrinsic Global Advisors Llc Stamford Value 17% -4% 13% 22% 36% $2,137 $6,007
f ld l hmeasured by equity
assets under
management
Westfield Capital Management Co. Lp Boston Aggressive Growth 30% -2% 28% -7% 21% $2,059 $9,804Sectoral Asset Management Inc. (Geneva Branch) Geneva Growth 100% 0% 100% 0% 100% $1,885 $1,885Friess Associates Llc Greenville Aggressive Growth 27% 1% 28% -9% 19% $1,840 $9,732Glenview Capital Management Llc New York alternative 55% -1% 54% -13% 41% $1,819 $4,414Walter Scott & Partners Ltd. Edinburgh Growth 18% 0% 18% 3% 21% $1,813 $8,803Greenleaf Asset Management, Inc. Kalamazoo Growth 65% 28% 93% 0% 93% $1,798 $1,942Timessquare Capital Management Llc New York Aggressive Growth 18% 0% 19% -1% 18% $1,756 $9,945Bellevue Asset Management Ag Küsnacht Growth 78% 6% 84% -1% 83% $1,746 $2,095Iridian Asset Management Llc Westport Growth 23% 1% 23% -1% 22% $1,477 $6,666Eagle Asset Management Inc St Petersburg Growth 17% 0% 17% -1% 16% $1 463 $9 194Eagle Asset Management, Inc. St. Petersburg Growth 17% 0% 17% 1% 16% $1,463 $9,194Jacobs Levy Equity Management, Inc. Florham Park Growth 16% -2% 14% 0% 14% $1,393 $9,754Edgewood Management Llc New York Growth 23% -2% 22% 0% 22% $1,357 $6,134Analytic Investors Llc Los Angeles Growth 16% -2% 14% 0% 15% $1,284 $8,614Chevy Chase Trust Co. Bethesda Value 14% 0% 14% -1% 13% $1,274 $9,728Baker Bros. Advisors Llc New York Growth 82% 1% 83% 2% 85% $1,259 $1,482Relational Investors Llc San Diego Contrarian 20% 5% 25% -3% 22% $1,250 $5,614Harris Investment Management, Inc. Chicago Value 14% -1% 13% 0% 13% $1,232 $9,657Mason Street Advisors Llc Milwaukee Growth 15% -2% 13% 0% 13% $1,232 $9,807S.A.C. Capital Advisors Lp Stamford Growth 11% 4% 15% 1% 17% $1,179 $7,121Maverick Capital Ltd. Dallas Growth 19% -5% 15% 0% 15% $1,178 $7,749Sound Shore Management, Inc. Greenwich Value 17% -1% 16% 4% 20% $1,158 $5,701Icahn Associates Corp. New York Turnaround 20% -5% 16% 0% 16% $1,150 $7,322Cramer Rosenthal Mcglynn Llc New York Value 8% 3% 11% 1% 11% $1,135 $9,915
Median 20% 0% 22% 0% 22% $1,612 $7,221
49% representative of change in assets between 3/31/09 and 6/30/09Source: Bigdough, excludes Indexed & Quantitative Investors“-” denotes accounts that have no holdings in the subsector
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Health Care Buyers and Sellers ($MM) - <$10B Under Management % Change in Current
Position Position ($MM)
H lth M t L 39% $3 057Healthcor Management Lp 39% $3,057
Partner Fund Management Lp 209% $1,034
Noonday Asset Management Lp 162% $1,088
Atticus Management Llc 1025% $709
Sectoral Asset Management, Inc. 23% $3,272$622
$646
$673
$700
$862
Walter Scott & Partners Ltd. 45% $1,813
Taconic Capital Advisors Llc 103% $1,027
Illinois State Board Of Investment - $514
Barclays Capital Securities Ltd. 168% $757
Suntrust Private Wealth Management 92% $894$429
$475
$514
$520
$564
$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000
% Change in CurrentPosition Position ($MM)
Capital Growth Management Lp -28% $788
Silchester International Investors Ltd. -32% $664($317)
($314)% $
Mcmorgan & Co. Llc -75% $111
Winslow Capital Management, Inc. -29% $872
Westfield Capital Management Co. Lp -19% $2,059
Chase Investment Counsel Corp. -56% $408
Pfa Pension -61% $333($526)
($509)
($469)
($353)
($332)
($317)
Pfa Pension 61% $333
Mackay Shields Llc -68% $248
Dreman Value Management Llc -60% $367
Friess Associates Llc -33% $1,840($893)
($548)
($538)
($526)
($1,000) ($900) ($800) ($700) ($600) ($500) ($400) ($300) ($200) ($100) $0
50% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Biopharmaceutical Buyers and Sellers ($MM) - <$10B Under Management % Change in Current
Position Position ($MM)
N d A t M t L 162% $1 088Noonday Asset Management Lp 162% $1,088
Atticus Management Llc 997% $691
Sectoral Asset Management, Inc. 23% $3,151
Healthcor Management Lp 50% $1,733
Taconic Capital Advisors Llc 103% $1,027$520
$581
$594
$628
$673
Barclays Capital Securities Ltd. 193% $713
Millennium Management Llc 37% $1,348
Suntrust Private Wealth Management 113% $614
Commerzbank Ag (Broker) 525% $377
Mason Capital Management Llc 166% $496$310
$317
$326
$366
$470
$0 $100 $200 $300 $400 $500 $600 $700 $800
% Change in CurrentPosition Position ($MM)
Hamblin Watsa Investment Counsel Ltd. -34% $513
Atalanta Sosnoff Management Corp. -34% $511($267)
($267)g p % $
Dreman Value Management Llc -72% $104
Ridgeback Capital Management Llc -70% $125
Sectoral Asset Management Inc. (Geneva Branch) -14% $1,885
Pfa Pension -54% $269
Shumway Capital Partners Llc -44% $424($338)
($312)
($302)
($294)
($272)
($267)
Shumway Capital Partners Llc 44% $424
Westfield Capital Management Co. Lp -22% $1,370
Capital Growth Management Lp -53% $391
Chase Investment Counsel Corp. -77% $154($515)
($435)
($385)
($338)
($600) ($500) ($400) ($300) ($200) ($100) $0
51% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Health Care Services Buyers and Sellers ($MM) - <$10B Under Management% Change in Current
Position Position ($MM)
P t F d M t L 551% $364Partner Fund Management Lp 551% $364
Shumway Capital Partners Llc - $236
Capital Growth Management Lp 7186% $215
Brookside Capital Investors - $196
S.A.C. Capital Advisors Lp 155% $291$177
$196
$212
$236
$308
Ridgeback Capital Management Llc - $165
Sound Shore Management, Inc. 92% $330
Owl Creek Asset Management Lp 57% $407
Greenlight Capital, Inc. 122% $267
Timessquare Capital Management Llc 16% $931$130
$147
$149
$158
$165
$0 $50 $100 $150 $200 $250 $300 $350
% Change in CurrentPosition Position ($MM)
Parcom Quoted Equity Management Bv -100% $0
Next Century Growth Investors Llc -43% $138($104)
($97)y % $
Snow Capital Management Lp -30% $265
Maverick Capital Ltd. -31% $263
Oppenheimer Capital -46% $165
Principled Capital Management Llc -98% $3
Numeric Investors Lp -37% $259($155)
($152)
($142)
($116)
($112)
($104)
Numeric Investors Lp 37% $259
Dreman Value Management Llc -49% $217
Silchester International Investors Ltd. -89% $34
Friess Associates Llc -56% $412($519)
($286)
($212)
($155)
($600) ($500) ($400) ($300) ($200) ($100) $0
52% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
INSTITUTIONAL HEALTH CARE FUND MOVEMENT
Top Medical Technology Buyers and Sellers ($MM) - <$10B Under Management% Change in Current
Position Position ($MM)
W lt S tt & P t Ltd 72% $877Walter Scott & Partners Ltd. 72% $877
Cramer Rosenthal Mcglynn Llc 49% $944
Healthcor Management Lp 30% $942
Viking Global Investors Lp 238% $298
Partner Fund Management Lp 348% $261$202
$210
$220
$308
$366
Relational Investors Llc 31% $831
Chieftain Capital Management, Inc. 107% $375
Orbimed Advisors, Inc. 54% $499
Generation Investment Management Llp 51% $453
Greenhaven Associates, Inc. - $126$126
$154
$175
$194
$199
$0 $50 $100 $150 $200 $250 $300 $350 $400
% Change in CurrentPosition Position ($MM)
Chase Investment Counsel Corp. -68% $51
Millennium Management Llc -30% $304($129)
($109)g % $
Sg Americas Securities Llc -55% $107
Pfa Pension -77% $44
Winslow Capital Management, Inc. -35% $287
Silvant Capital Management -63% $104
Trilogy Global Advisors -52% $161($175)
($174)
($153)
($145)
($129)
($129)
Trilogy Global Advisors 52% $161
Mackay Shields Llc -74% $69
Friess Associates Llc -38% $366
Cantillon Capital Management Llc -56% $225($286)
($222)
($198)
($175)
($350) ($300) ($250) ($200) ($150) ($100) ($50) $0
53% representative of change in assets between 3/31/09 and 6/30/09Source: BigdoughExcludes Indexed & Quantitative Investors
Minneapolis800 Nicollet Mall800 Nicollet Mall
Suite 800Minneapolis, MN 55402
(612) 303-6000
San Francisco345 California Street
Suite 2400San Francisco, CA 94104
(415) 277-1500
New York
L d
New York150 East 42nd Street
Suite 3500New York, NY 10017
(212) 284-9300
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